Share Price Down – Value Up

by | May 10, 2010 | Archives

As share prices are down, equity value is up.

I shared three warnings about the US stock market at Jyske Global Asset Management’s (JGAM) Laguna Beach forex seminar, a weekend ago and began slipping these warnings out in messages even before then.


I have sent two recent market warnings. Our April 21 message warned about the risks in May that start with Seasonality.

Then May 3  our message had an Economic Cycle Review that showed why equities could be in danger now.

However Southern California look great and…


affluent. View from Laguna Beach hotel.  The restaurants on May 1st were expensive… but busy.

A lull before the storm?


However before I could get the third warning to you, the bottom fell out of the Dow as this Dow Industrial chart from shows.

This third warning however is still worth sending because as it is said, “you ain’t seen nuttin yet”.

Last Friday’s USA Today article “Stocks drop again as Dow plunges 5.7% for the week” suggests that the market fall may not be over when it said:

The stock market’s wild ride may not be over yet.  The Dow Jones industrials whipsawed again Friday, a day after their largest one-day plunge. The average was down as much as 279 points in the morning, went briefly into the black around lunchtime, then ended with a loss of 139.

I agree.  Here are some of the comments and slides I shared with the JGAM delegates in Laguna Beach at the beginning of the month.

“The market has been running in 15 to 17 year bull and bear cycles for over 100 years.

I call this the Economics of War

• There is a War
•War Creates New Technology
•New Technology is Domesticated
•Domesticated Technology Improves Productivity
•Markets Oversell
•Markets Crash
•Recession Leads to War

“Here you can see the war and the slide that shows the market with pre war recessions and post war booms.


Here are the best slides we shared at that JGAM seminar… before the market collapsed.


“The last bear market ran 15 years from 1968 to 1982.  Then a bull market began and ran 17 years from 1982 to 1999.


“The latest (and current) bear began in 1999 and we are in the 11th year.  We can compare what happened in 11 years from 1966 to 11 years after 1999.

“The synchronicity of the Dow in those 132 month periods is 100% as close as you can get.


“A chart from Moore Research ) comparing the Dow’s chart from 1978- 1980 to that of 2007 to 2009 which are similar periods (years 11 & 12 in the bear wave) sow a strong correlation and suggest that the market should have risen as it did.


“Another chart from Moore research shows what the Dow did next in the previous bear (1979 to 2010).  Ignore the black line. Look only at the blue. This is what (if this theory is correct) we should expect into 2010.  See the severe drop?


“The blue line shows what the theory suggests comes next


“A severe drop.”

The volatility of last week further conforms that the market is at a nervous top so these warnings we shared over a week ago are fortified.

Now let me add that this can be really good for investors who do not have to cash in their equities in the next several years.

As share prices are down, equity value is up.

Plus if the 15 year theory is on target we are not too far from the beginnings of the next bull.

Another Moore Research chart we shared in Laguna Beach confirms this thought. Again ignore the black line.  The blue line shows that the theory suggests we’ll see in 2011 (a serious drop) into 2012 when the next bull will begin.


The problem with theories like this… though helpful, they are also not exact… often off a month or quarter or two.  Hence market timing almost never works.

What we do know is that in the long term, markets are efficient. In the short term they are ruled by human emotion that keep share prices mostly out of balance… either bad value in bubbly times or good value in bad times.

If share prices slide over the next two years, we get some more great buying opportunities and can then ride a bull market for over a decade and a half… enjoying excellent gains on the shares we accumulate now.

Plus keep in mind that this theory applies to the US market.  From this we can then add value and correlation theories from other markets.

In the end… when buying shares… value is always the best guide. Value cuts through all the noise. Value is an honest and truly reliable long term indicator that provides order during chaos.  Upcoming messages will look at value equities and value shares available in the USA and abroad.


P.S. Join us for our next market value update sessions at our Quantum Wealth Course in North Carolina June 24 to 28.

Or join us in Copenhagen at Jyske Bank for their 2010 Global Wealth Management Seminar.

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